Administration and Returns

Chapter XIV (S.236-261) is the institutional backbone of the Income-tax Act. It establishes the tax administration hierarchy, assigns jurisdiction, confers powers of investigation, search, seizure, survey, and information collection, and provides the faceless assessment framework. While these provisions do not directly determine tax liability, they determine WHO assesses the taxpayer, WHAT powers the assessing authority possesses, and HOW the assessment process is conducted. Every practitioner must understand this chapter to effectively represent clients before the authorities.

14.2.1 Section 236 — The Hierarchy

Key structural features: The 2025 Act retains the dual hierarchy (Commissioner stream and Director stream) from the 1961 Act. The Commissioner stream handles assessment and appeals; the Director stream handles investigation and intelligence. The CBDT sits at the apex with powers to issue instructions, assign jurisdiction, and prescribe rules. Critically, S.239(2) prohibits the Board from directing any authority to make a particular assessment or interfering with appellate discretion of JC(A) or CIT(A) — preserving the quasi-judicial independence of assessment and appeal functions.

14.2.2 Section 239 — Board’s Instruction Power

Three special powers: (a) S.239(3)(a): General orders on assessment/collection procedures — must not be prejudicial to assessees. (b) S.239(3)(b): Condonation of delay — the Board may authorise authorities to admit applications/claims after the statutory deadline to avoid genuine hardship. This is the basis for all condonation petitions. (c) S.239(3)(c): Relaxation of Chapter IV/VIII conditions — where an assessee fails to comply with a condition for claiming a deduction due to circumstances beyond his control and complies before assessment completion, the Board may relax the requirement. This is a powerful hardship relief tool.

14.2.3 Section 240 — Taxpayer’s Charter

A significant governance innovation: the Board is mandated to adopt and declare a Taxpayer’s Charter setting out the rights and obligations of taxpayers and the administration. This was introduced in 2020 and continued in the 2025 Act. The Charter includes commitments to fair treatment, minimal compliance burden, expeditious resolution, privacy protection, and accountability. While not directly enforceable in court, the Charter creates legitimate expectations that inform judicial review of administrative action.

14.2.4 Section 245 — Faceless Jurisdiction

The most transformative administrative provision in modern Indian tax law. S.245 empowers the Central Government to make schemes for faceless exercise of ALL powers and functions of income-tax authorities — faceless assessment, faceless appeals, faceless penalty, and faceless jurisdiction assignment. The scheme must eliminate human interface to the extent technologically feasible, optimise resources through functional specialisation, and introduce team-based assessment with dynamic jurisdiction. Under this provision, the faceless assessment scheme (covering all non-search assessments), the faceless appeal scheme (CIT(A) level), and the faceless penalty scheme have been notified. The Act explicitly allows the Central Government to disapply or modify any provision of the Act for implementing faceless schemes (S.245(3)).

14.3.1 Section 246 — Discovery, Production of Evidence

The AO, JC, JC(A), CIT(A), CIT, PCIT, CCIT and DRP have the same powers as a civil court under the CPC for: (a) discovery and inspection; (b) enforcing attendance and examining on oath (including bank officers); (c) compelling production of books of account; and (d) issuing commissions. Additionally, investigation officers (not below Assistant Commissioner rank) can exercise these powers even without pending proceedings, for DTAA-related inquiries or where income concealment is suspected. Books impounded can be retained for 15 days (extendable with approving authority’s sanction).

14.3.2 Section 247 — Search and Seizure

The most invasive power in the Act. Where the competent authority has ‘reason to believe’ that a person has failed to produce documents, or possesses undisclosed income/property, the authority may authorise entry, search, seizure of books, documents, computer systems, and assets (other than stock-in-trade). Key features: (a) break open powers; (b) search of persons entering/leaving the premises; (c) requisition of police services; (d) deemed seizure by prohibitory orders (60-day limit); (e) jurisdiction extends to premises outside the officer’s area if delay would be prejudicial to revenue. The search must be conducted with two or more witnesses, with a panchnama drawn up on completion. Seized assets must be released within 60 days unless retained with PCIT/CIT approval.

Post-search procedures: Seized books can be retained for 30 days (extendable to the last date of assessment/reassessment). The assessee may take copies/extracts. Seized assets not produced before the AO or the Tribunal become property of the government after the time for appeal expires. Seized cash can be applied towards existing tax liabilities with the assessee’s consent and PCIT/CIT approval. Electronic evidence (computer systems, hard drives, digital records) is explicitly covered — the authorised officer can override access codes and require technical assistance.

14.3.3 Sections 248-253 — Requisition, Survey, Information Powers

S.248 — Requisition: Where books/documents/assets are in custody of another authority (e.g., police, customs), the income-tax authority may requisition delivery. The custodial authority must comply and the provisions of search/seizure apply to requisitioned items.

S.253 — Survey: An income-tax authority may enter any place of business/profession during business hours and: (a) inspect books; (b) check inventory; (c) record statements on oath; (d) take copies of books; (e) impound books with reasons recorded. The survey power is less invasive than search (no seizure of assets, no residential entry) but is the primary tool for verifying compliance at business premises. Additionally, S.253(4) empowers the authority to enter any building/place for obtaining information relevant to any person, even without a pending proceeding.

S.254-261 — Information powers: Power to call for information from any person (S.254); statement of financial transactions by specified persons (banks, registrars, etc.) with prescribed thresholds (S.256); power to collect information for Anti-Benami enforcement (S.257); automatic exchange with banking/financial authorities (S.258); and registration/reporting obligations for trusts, institutions, and non-profit organisations (S.260-261).

Chapter XV is the compliance gateway to the Act. Without a valid return of income, the entire assessment machinery cannot function. This chapter covers: PAN/Aadhaar allotment and quoting (S.262), return filing obligations and due dates (S.263), updated returns (S.263(6)), defective returns (S.263(7)), belated returns (S.263(4)), revised returns (S.263(5)), and return processing (S.264-267). Every section has direct consequences for penalties, prosecutions, and loss carry-forward.

PAN is the universal tax identifier. Every person must obtain PAN if: (a) income exceeds basic exemption; (b) business turnover exceeds Rs.5 lakh; (c) required to file a return; (d) resident non-individual entity entering into financial transactions of Rs.2.5 lakh or more; (e) directors, partners, trustees, key persons of such entities; or (f) intends to enter prescribed transactions. PAN must be quoted in all returns, correspondence, and challans. Aadhaar must be linked to PAN (S.262(5)-(6)); failure makes PAN inoperative. Aadhaar can be quoted in lieu of PAN (S.262(7)). PAN must be authenticated in prescribed transactions (S.262(9)). A person cannot hold multiple PANs (S.262(8)).

15.3.1 Who Must File

15.3.2 Due Dates

15.3.3 Types of Returns

S.264 — Return verification: Every return must be verified by the assessee or an authorised person. Return is not valid until verified. Returns filed electronically must be verified within 30 days by Aadhaar OTP, digital signature, or physical ITR-V submission. Returns not verified within the prescribed period are treated as if never filed.

S.265 — Computerised processing: Returns are processed centrally by the Centralised Processing Centre (CPC). Processing includes: (a) total income computation after adjustments for arithmetical errors, incorrect claims, and disallowances evident from the return; (b) tax computation with interest under S.398/399; (c) determination of refund/demand. An intimation under S.265 is issued within 9 months from the end of the tax year in which the return is filed.

S.266-267 — Rectification and compliance: The CPC can rectify processing errors. If there are discrepancies between the return and information available (TDS returns, SFT, third-party data), the assessee is notified through a compliance window before adjustment. This ‘e-verification’ process has substantially reduced the need for formal assessment proceedings.

[End of Chapters XIV and XV. Chapter XVI: Assessment follows.]